The New Zealand dollar is continuing to test six-month lows as equity markets again succumb to concerns about European sovereign debt even though local milk powder prices were better than some analysts expected at Fonterra's latest online auction.
The kiwi was at 74.90 US cents at 8am after falling to 74.80 US cents, its lowest level since March 24, in overnight trading. It remained below the 75.30 US cents at 5pm yesterday.
Prices for all products Fonterra auctioned fell 1.6 per cent, but Mike Burrowes, market strategist at Bank of New Zealand, said that "thanks to a collapsing New Zealand dollar", prices in New Zealand dollar terms rose 7.6 per cent overall.
"We were more in the camp that there may be a large decline in dairy prices in this auction, but that hasn't happened. We see the auction as a net positive," he said.
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Advertise with NZME.Still, the main driver of the currency market was developments in the European debt crisis, he said.
The US equity market was again in negative territory as the New Zealand day began, having given up earlier gains.
Worries that the bailout of Greece will unravel and European banks will collapse continued to haunt investors even after Federal Reserve chairman Ben Bernanke said he was ready to take more steps to boost growth in the US economy.
Euro-zone finance ministers have reached a deal to provide collateral to Finland, but Greece's failure to meet deficit targets and worries about Franco-Belgian bank Dexia SA's exposure to Greek government debt are dominant themes at the moment.
The Standard & Poor's 500 Index was down 1.2 per cent. It had been ahead 0.3 per cent on demand from bargain hunters in a market trading at a 13 month low.
The New Zealand Institute of Economic Research's quarterly survey of business opinion yesterday showed local firms were less optimistic about this country's recovery, adding to the general state of uncertainty in markets.
The Reserve Bank of Australia held its target cash rate at 4.75 per cent yesterday, as expected, with Governor Glenn Stevens citing the volatility in global financial markets as a brake on both domestic growth and inflation.
The kiwi rose to 79.65 Australian cents from 79.44 cents yesterday. It fell to 57.64 yen from 57.72 yen yesterday and rose to 57.64 euro cents from 57.06 euro cents yesterday. It was at 67.70 on the trade-weighted index from 67.93 yesterday. The kiwi dollar was little changed at 48.69 from 48.80 British pence yesterday.
